Investment Commentary –October 4th, 2017
Market Indices as of Market Close October 4th, 2017
Dow 22,641 (16.67% YTD)
S&P 2,534 (11.57% YTD)
NASDAQ 6,531 (21.34% YTD)
Global Dow 2,891 (14.34%)
Gold $1,280 (9.83%)
OIL $50.28 (-11.80%)
US 10Y Treasury 2.313 (-13.21%)
Barclay Bond Aggregate (3.47% YTD)
Puerto Rico bonds tumble to record lows after Trump says debt has to be wiped out
Puerto Rico general obligation bonds, as well as bonds issued by the utility Puerto Rico Electric Power Authority were trading at all-time lows early Wednesday, after President Donald Trump said the island’s debt may need to be wiped out. “They owe a lot of money to your friends on Wall Street and we’re going to have to wipe that out. You’re going to say goodbye to that, I don’t know if it’s Goldman Sachs GS, +0.40% but whoever it is you can wave goodbye to that,” Trump said in a pre-recorded interview with Geraldo Rivera that aired on Sean Hannity’s show Tuesday night. The 8% GO bonds due 2035 were trading below 48 cents on the dollar, according to research firm Credit Sights, while the Prepa 5% notes due 2037 were trading at 42 cents on the dollar.
Major U.S. companies spent nearly 10% less on stock repurchases in this year’s second quarter than they did in the first quarter, according to S&P Dow Jones Indices. One reason for the decline: Stock prices continued to rise in the spring, making it more expensive for companies to buy back shares.
News around the web
Tech turnaround: The major stock indexes posted small gains for the week, with the NASDAQ Composite reaching a record high and outpacing the Dow and the S&P 500. The NASDAQ’s result was due largely to a strong week for information technology stocks, which rallied after a shaky start.
Tax release: President Trump unveiled the outline of his proposed tax overhaul, including a reduction in the corporate tax rate from 35% to 20%. Many details of the outline will be filled in by Congress as debate over taxes intensifies in coming days.
Inflation mystery: Federal Reserve Chair Janet Yellen said the central bank’s projection for gradual increases in interest rates remains the appropriate policy for now, despite unexpected weakness in recent inflation figures. In a speech, Yellen said the Fed could slow the pace of future increases if low inflation persists.
LEADERS & LAGGARDS
Leaders this past week included Basic Materials, Conglomerates. Laggards included Healthcare and Utilities.
Investment Definition: Collateralized Debt Obligation- CDO
A structured financial product that pools together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors. A collateralized debt obligation (CDO) is so-called because the pooled assets – such as mortgages, bonds and loans – are essentially debt obligations that serve as collateral for the CDO.
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.